Abstract

Benchmarks form an integral part of fund management, both for active managers who seek an appropriate index against which to evaluate their performance, as well as passive fund managers who seek an index to track. The question of what constitutes a suitable benchmark, however, is a practical problem that has perplexed both fund managers and clients alike. The aim of this study is to investigate this problem in the context of the Johannesburg Stock Exchange (JSE), which is characterised by high levels of concentration both in terms of market capitalisation and liquidity and further complicated by a large and relatively volatile resources sector.